To misquote Benjamin Franklin, there are only two things
certain in life – death and fuel taxes. Every budget, Governments used to raise
fuel duty at midnight and motorists would flock to petrol stations the night
before. This Government is the first to reverse this trend for many years. Not
only has it frozen fuel duty in real terms, but also cut it by 1p in 2011. Yet
despite this, the price of petrol and diesel has become the number one toxic
political issue. And why? Because motorists are facing fuel poverty. Figures
show average motorists spend £1700 per year on fuel – a tenth of their income.

Of course the Government can do more to cut fuel duty, and I
hope it is the first candidate for tax cuts as soon as the economic conditions
allow. But we have to face the inconvenient truth that it might also be oil
companies keeping up the price of fuel, even taking into consideration
geo-political factors. So how are they allegedly doing it?

Petrol Deserts. Britain now has 60% fewer petrol stations than it did in 1990.
This has left some areas of the UK as “petrol deserts” where motorists have to
drive miles to fill up. There is a wealth of evidence. In Cornwall, for example,
a hypermarket sold fuel below cost-price until all the other independent petrol
stations closed. Then the prices rose considerably. Without market choice,
there is no competition – and this keeps our fuel prices high.

Rocket and Feather Practices. Ever noticed how prices at the pump are quick to go up, but slow
to decrease? In December last year, the AA showed that from October 2012, the
wholesale price of oil had fallen by at least 10p, but only 4p of this saving
had been passed on to motorists. Furthermore, data from DECC shows that there
is a price lag of around 3 to 4 weeks before any savings are passed on.
However, when the international oil price increases, evidence shows that the
oil companies are quick to raise the price of petrol at the pumps – sometimes
significantly higher than the market suggests; this was the case in February
2012

Financial speculation
is keeping prices high. As documented on the PetrolPromise.com website that I set up,
there are whistleblowers who allege that there is manipulation of prices in
order to increased profits. One way this is alleged to have been happening is
the abuse of the Platts system, which is the world’s leading oil price
reporting agency. Every day, there is a half-hour period where oil transactions
are self-reported to Platts. This leaves the system open to manipulation and
lacking in transparency. A whistleblower told me about how huge trades would be
offered and then withdrawn to manipulate the price of oil.

Other whistleblowers have told me about other scams, such as
how companies would allegedly buy oil from other oil companies at key times to
restrict supply.This is particularly an issue when oil companies would benefit
through Contracts for Difference (CFD), which pay out depending on the relative
price of oil over two different dates. Oil companies would buy an excess of oil
from other companies, and subsequently sell it for a below-market price once
the CFD has netted a massive profit due to the restricted supply . This results
in a false impression of the market and artificially increases the price of
oil, resulting in huge profits for the companies. Of course, the increased
price of oil is then passed down onto the consumer.

As Conservatives, we shouldn’t be shy of
attacking croney capitalism. This is not an assault on capitalism or the free
market: it is precisely the opposite. Conservatives have a responsibility to
ensure fair competition, transparency, and genuinely free markets. If it is
true that oil prices have been manipulated, we should use the full force of
the criminal law to deal with it – even
changing the law to ensure penal sentences for major price-fixing. There should
also be no taxpayer subsidies to these industries, and if serious price fixing
is proved to be widespread across the oil industry, rather than being limited
to allegedly one or two companies, the Government should consider a windfall
tax on the oil industry where the proceeds raised are passed back to the
consumer through lower fuel duty. If true, their actions will have had an
enormous impact on every individual whether they drive or not. The price of oil
affects food, transport, industry, and can act as a major brake on economic
growth.